We all have bad money habits. It’s the truth—we’re only human. As business owners, unfortunately, we likely learn money facts the hard way majority of the time. But chances are, while we’re gaining experience and learning as we go, bad habits already exist that never should have formed in the first place.
From living with a “pay now, worry later” mindset to overindulging in business expenses you don’t really need (simply because you know payday is right around the corner), many of us struggle with poor money habits.
Here are a few starting points to help you can tackle those recurring personal money habits that affect you and your small business.
1. Turning a blind eye to financial education
Many of us neglect financial knowledge—at least until running our own businesses become more than just a feasible “idea.” According to an MNP 2018 survey by 1,500 Canadians, 67% of Canadians aren’t confident in their ability to handle their finances. When it comes to their increasing debts, 58% of them wish they could go back and do things differently.
Too many small business owners and first-time business owners are not aware of the difference between net income and gross income, says Rachel Cruze. This is dangerous for your personal money habits. As not knowing how much money you truly make becomes a recipe for disaster: you are far more likely to overspend.
Solution: Take the time to learn bookkeeping. If you already have a bookkeeper/accountant, then that’s great! Take ownership of your finances and their services by asking questions whenever you’re unsure. Yes, they may be ultimately responsible for your business taxes this year, but sooner or later, you’ll need to understand your overall finances in order to make smarter business decisions.
2. Accessing your savings account too easily
Ever tried to save money, but only to tap into your savings when something unpredictable comes up? (Hint: I’m talking about that last minute trip you and your friends are planning). If this sounds familiar, this is probably another bad money habit you need to kick. Often times, even consistently setting a portion of your income aside doesn’t necessarily stop you from cashing out for trivial reasons.
Solution: If you’re constantly overspending, it’s clear that your savings account isn’t growing. To kick this money habit, track and categorize all your expenses. Every Sunday, sit down with your bank statements to categorize and discover where every dollar is heading. If you’re tracking specific business expenses, a great way is to use Kashoo, which helps you manage both income and expenses in one unified software. It may seem like hard work at first, but you may even find some purchases that you can eliminate right away! (i.e. that $5 dollar macchiato that you found too sweet, but not sure why you bought it in the first place…)
3. Indulging in business expenses you don’t really need
Just because you run a business doesn’t mean you need to flaunt it from the get-go. Many small business owners often adopt not-so-good money habits when they first start their businesses. When creating a website for your business—do you really need that expensive website theme? Or can you pick a more basic one instead?
Solution: Be honest with yourself when it comes to business purchases. A good rule of thumb is to practice a cool down period before you commit your money to a prospective investment.
Once you’ve got your habits in check, you can manage your business finances with Kashoo! Kashoo allows you to easily record your expenses, income, and even invoice clients on-the-go. Never worry about catching up your books again! Ready to get started? Try us free for 14 days.